TMFMmbop (38.74)

X-Treme Kayaking and Better Investing

6

Let me provide some context. I enjoy whitewater kayaking. I have a boat, and I can do simple tricks in the Potomac, including boofing 3 to 6 foot drops. It's fun as heck. But what the guys are doing in that article (including an incredible video of Ben Stookesberry dropping a 65-foot falls with a headcam) is unbelievable.

What does this have to do with investing? I call your attention to this passage:

There’s an ideal line where the water falls cleanly and then shoots out in a “flake” spraying off a big rock, away from the churning water at the base. The path is just a few feet wide. The rest is frothy chaos.

Edging too far to the right could send him hurtling into a steep cliff where the water churns violently at the bottom. He could get caught in the eddy. Worse, he could be sucked into a cave behind the falls, out of rescuers’ reach. Too far left, and he would likely be pulled into the middle of the falls, where the water collapses inward into a deep rock fissure.

On the river bank, Mr. Stookesberry mapped out his course with his college buddy and kayaking partner, Eric Seymour. He tossed big sticks into the river to identify small waves and other features that would help him navigate a precise path. As the men discussed a worst-case scenario rescue plan, the roar was so thunderous that they had to stand next to each other and yell to communicate.

I guess this is less about investing and more about managing risk and temperament, but since investing is 99% managing risk and temperament, it's applicable. The point is you can execute on seemingly dangerous stunts (like dropping a 65-foot waterfall or buying a Chinese micro cap) provided you've spent the time studying every aspect of the action. This doesn't mean something can't go wrong (indeed, the article details a few of Mr. Stookesberry's brushes with death), but you can reap enormous payoffs from these situations provided you've done some homework.

Moreover, the more dangerous stunt is to try to drop a 5-footer without scouting it out at all (call this buying a US large cap without doing your due diligence). That's because you're suffering from severe overconfidence bias and more times than not, have done nothing to protect yourself from something going awry.

Don't think too hard on it. If you just enjoy the video, that's enough for me.